1990 (11) TMI 16 - HC - Income Tax

Capital Work In Progress, Equipment Used In Deep Sea Fishing, Export Market Development Allowance, Investment Allowance, New Industrial Undertaking, Special Deduction, Weighted Deduction

Summary

Issues:
1. Entitlement to investment allowance for Deep Sea Fishing Division II Unit.
2. Allowance of claim under section 35B for Export Inspection Agency Fees.
3. Entitlement to relief under section 80I for Deep Sea Fishing Division II Unit.
4. Inclusion of 'Capital work-in-progress' in computing capital for section 80J relief.

Analysis:

1. The first issue pertains to the entitlement of investment allowance for the Deep Sea Fishing Division II Unit. The Income-tax Officer initially rejected the claim, stating that fishing activities do not constitute an industrial undertaking. However, the Commissioner of Income-tax (Appeals) allowed the claim, which was further upheld by the Tribunal. The High Court determined that the operations in the Deep Sea Fishing Division involved processing natural produce into marketable products, thereby constituting production of an article. The court held that the processing of fish amounted to the production of an article, making the division eligible for relief under section 32A of the Income-tax Act. Consequently, the first question was answered in the affirmative in favor of the assessee.

2. The second issue concerns the allowance of the assessee's claim under section 35B for Export Inspection Agency Fees. The High Court referenced a prior decision involving the same assessee and concluded that the claim should be allowed. The court answered this question in the affirmative and in favor of the assessee, based on the precedent set in the earlier case.

3. The third issue revolves around the entitlement to relief under section 80I for the Deep Sea Fishing Division II Unit. Similar to the second issue, the court relied on a previous decision involving the same assessee and concluded that the division was entitled to the relief under section 80I. The court answered this question in the affirmative and in favor of the assessee, following the precedent established in the prior case.

4. The final issue addresses the inclusion of 'Capital work-in-progress' in computing capital for the purpose of allowing relief under section 80J of the Income-tax Act. The court referenced a prior decision involving the same assessee and determined that the Tribunal was justified in considering capital work-in-progress while computing the capital for section 80J relief, provided such capital was employed at the start of the accounting period. The court answered this question by affirming the Tribunal's decision on the matter.

In conclusion, the High Court ruled in favor of the assessee on all the issues raised in the reference under section 256(1) of the Income-tax Act, 1961, for the assessment year 1980-81.